Europe, the defence industry, innovation, and competitiveness: new horizons for the space sector?
João Nuno Frazão
§1. In late December 2025, Regulation (EU) 2025/2643 entered into force, establishing the European Defence Industry Program (EDIP) and setting out a new framework for strengthening the European defence technological and industrial base (EDTIB)[1]. Its purpose is to strengthen the technological leadership, innovation, readiness, long-term competitiveness, resilience, integration, and preparedness of the DTIB, to ensure the availability and timely supply of defence products and to contribute to the recovery, reconstruction, and modernisation of Ukraine’s defence technological and industrial base (article 1(1)).
In addition to the EDIP, Regulation (EU) 2025/2643 also establishes: (i) the Ukraine Support Instrument (USI), a cooperation programme with Ukraine with a view to the recovery, reconstruction and modernisation of the Ukrainian DTIB, taking into account the possible future integration of Ukrainian DTIB into the EDTIB; (ii) the legal framework for European Defence Projects of Common Interest (EDPCIs); (iii) the European Military Sales Mechanism; (iv) the legal framework for Structures for European Armament Programmes (SEAPs); and (v) the legal framework to prepare for and respond to the impact of supply crises on the internal market, intended to ensure, on the one hand, the security of supply of crisis-relevant products and, on the other, the proper functioning of the internal market for defence products, notably by preventing the emergence of obstacles (article 1(2)).
This instrument is supported by a budget for the period 2025 to 2027, which coincides with the period of application of Regulation (EU) 2025/2643, or rather from 30 December 2025 to 31 December 2027 (thus making use of the remaining timeframe of the Multiannual Financial Framework (MFF) for the period 2021-2027[2]), in the amount of €1,200 million, plus €300 million assigned for the USI, thus, in total, €1,500 million – without prejudice to any additional contributions that may be made (articles 3(1), 5, 23 and 86)[3].
§2. Regulation (EU) 2025/2643 originated from the Commission´s proposal of March 2024[4]; accordingly, little more than a year and a half elapsed before the adoption of the final text – another “fast-track” legislative procedure, similar to other legal acts adopted following Russia’s invasion of Ukraine in February 2022[5]. Indeed, in this context, two key milestones marked the European Union (EU)’s deepening engagement in space-related security and defence matters: the Strategic Compass, adopted by the Council in March 2022[6], and, less than a year later, the EU’s Space Strategy for security and defence, the first of its kind prepared by the Commission[7]. The backdrop was (and is) precisely the war in Ukraine, with the Commission stating, at the time of the proposal, the following: “There is no defence without a defence industry”[8]. According to the Commission, Regulation (EU) 2025/2643 is consistent with other EU policies, as it complements the European Defence Fund (EDF)[9] and incorporates two other legal acts: Regulation (EU) 2023/2418[10] and Regulation (EU) 2023/1525[11], both of which ended at the end of 2025[12] – something that certainly weighed in favour of the budget package now being implemented, maintaining the financial framework proposed by the Commission.
That said, none of those – and, above all, the EDIP proposal – made any reference to space and space activities. In this regard, however, Regulation (EU) 2025/2643 brings new developments. Within the legal framework for EDPCIs, this legal act clarifies what is at stake, that is, such common projects “consist of collaborative industrial projects aimed at reinforcing the competitiveness of the EDTIB throughout the Union, while contributing to the development of Member States’ military capabilities critical for the security and defence interests of the Union, and including those capabilities securing access to all operational domains, namely land, maritime, air, space and cyber” (article 35(1)). In other words, Regulation (EU) 2025/2643 goes further than what the Commission proposed, by ensuring it covers capabilities across all operational domains, with particular emphasis on the fourth and fifth operational domains – space and cyberspace, respectively. The deployment of an EDPCI may therefore consider space as one of the “collaborative industrial projects” and thus be eligible for EU funding, provided that it consists of one or more activities related to: (i) the common procurement of defence products; (ii) accelerating the adjustment to structural changes of the production capacity of defence products; (iii) the industrial development of new defence products or the upgrading of existing ones; and (iv) the development and procurement of necessary infrastructure (articles 35(8) and 10(1)(d)).
§3. More recent is the Commission proposal for a regulation establishing the Programme for agile and rapid defence innovation (AGILE)[13], made public in March 2026. The main objective of this new programme is to support the rapid innovation capacity of small and medium-sized enterprises (SMEs), including start-ups and scale-ups, “with a view to supporting the rapid delivery of emerging and disruptive products and technologies for defence to address the most recent and fast evolving challenges faced by Member States’ armed forces, in particular those stemming from Russia’s war of aggression against Ukraine, with a focus on cost-efficiency”. According to the Commission, AGILE “shall thereby foster the competitiveness of the European Defence Technological and Industrial Base (EDTIB) and contribute to strengthening the Union’s defence readiness, while reducing strategic dependencies on non-associated third countries”[14].
The context of the proposal focuses, above all, on innovation and competitiveness. The Commission first highlights the acceleration of “defence innovation cycles (…) at an unprecedented speed”. Specifically, the Commission notes that “emerging and disruptive technologies in fields such as artificial intelligence, quantum, robotics, cyber and space are becoming decisive for military effectiveness”, and, in parallel, “new Defence players (particularly SMEs and start-ups, including those coming from the civilian sector), are becoming a significant driving force for the transformation of the EU defence industry”. These are the new entrants which, in the Commission’s words, by bringing “faster innovation cycles, greater agility, cost-efficient solutions and novel operational concepts (…) are reshaping how innovative defence technologies and products are developed and delivered”[15]. It should be mentioned that the path taken by the EU is reflected in related initiatives, particularly the EDF, created in 2021, from which other initiatives aimed at innovation in the defence sector have been launched[16]. Indeed, building on the EDF, the EU has been developing a substantial framework to support defence innovation in response to current challenges, with programmes and initiatives intended to foster “(…) competitiveness and the innovation capacity of the EDTIB (…)”[17].
It is also worth noting that the proposal comes in the context of the European Defence Transformation Roadmap, presented by the Commission in November 2025[18]. As the Commission points out in the explanatory memorandum to the AGILE proposal, the Roadmap “calls for a fundamental shift in mindset and processes across the European defence ecosystem towards greater speed, agility and risk-taking”[19]. In fact, among other considerations, the Roadmap points out that innovation is essential to Europe’s defence readiness, in that “disruptive technologies and their fast development, testing and embedding in defence capabilities are essentials of modern warfare”; thus, in order to “build credible deterrence and be ready for the unthinkable, the EU should accelerate its defence industrial transformation and fully unlock the potential of innovation”[20].
Stressing the ongoing revolution in European defence, the Roadmap highlights critical technologies capable of transforming defence capabilities, including artificial intelligence, quantum technology, and space technologies. As for the latter, the Roadmap acknowledges that they form the basis of “multidomain operations by providing the data backbone for decision superiority and operational coordination”, providing “advanced solutions for geo-spatial intelligence and situational awareness, secure communication on the battlefield as well as enhanced prevision for defence capabilities”[21]. Initiatives such as the EU Secure Connectivity Programme (IRIS²)[22] – still in the design phase – the Galileo Public Regulated Service (PRS) – the global satellite navigation system that forms part of the EU Space Programme (EUSP)[23] – and the planned Earth Observation Governmental Service (EOGS)[24], “will lead to further integration of space-based solutions in defence capabilities while de-risking and reducing dependencies”[25]. Beyond these considerations, one of the proposed actions is to leverage the Commission’s role “as a potential customer for new dual-use companies”, initially focusing on companies in the space sector by the fourth quarter of 2026, for example through the procurement of commercial services or products such as geospatial data[26].
Returning to the AGILE programme proposal, this is an unprecedented initiative, i.e., a “pilot-instrument”, limited in terms of duration, funding, objectives and impact. The Commission intends for AGILE to be operational and in force from 1 January 2027, and only until 31 December of that year, since, like EDIP, it will be implemented under the current 2021–2027 MFF[27]. For that reason, the foreseen budget of €115 million comes from the redeployment of appropriations within the current EU budget allocated to programmes relating to the defence industry and space, including the EDF, the EUSP and EDIP itself – thereby creating no additional financial impact for Member States or for the EU[28]. Beyond its objectives, already identified, the AGILE programme will likely have a considerable impact in the space domain. Once again, space capabilities are identified as indispensable for security and defence operations, in addition to their critical role in intelligence, surveillance and reconnaissance, secure communications, as well as navigation and positioning. In detail, the proposal underlines that the “growing dependence of armed forces on space assets, combined with the increasing vulnerability of space infrastructures to threats, makes the resilience and responsiveness of the European space sector a strategic priority”[29].
Alongside this, the Commission highlights the dual-use nature of space technologies and services which means that innovation in this sector has direct and immediate implications for defence capabilities, and demand from defence can “accelerate the development and commercialisation of European space technologies”. Consequently, the AGILE programme, if adopted, is designed to “support the development of innovative space-based and space-enabled defence capabilities, including by new entrants and non-traditional actors, in order to strengthen the EU’s strategic autonomy in space and reinforce the EDTIB”. In addition, the national dimension is not overlooked, as support is also envisaged for “activities in the space domain to accelerate the uptake of space-based defence capabilities by Member States and the EU”, in line with the EUSP, IRIS², or as regards the activities of the EU Satellite Centre (SatCen), while simultaneously ensuring coherence with relevant EU initiatives related to space[30].
§4. The EU’s new measures – both those being implemented and those planned – are promising signs of momentum for innovation and competitiveness in the European space industry. Defence is undoubtedly the current and future main driver for investment in space: armed forces’ needs for connectivity, navigation and positioning, as well as intelligence and reconnaissance, will be multiplied in the future, requiring the development of new space infrastructures, in the form of constellations or other long-term projects. The strengthening of the components of the EUSP, in particular Galileo and Copernicus, alongside the future IRIS², clearly demonstrates this. This EU-level effort to create more and better industrial initiatives benefits the EU itself, but also the Member States, whose support is crucial – including in the legislative procedure, given the legal basis relied upon by the Commission in its proposal, namely article 173(3) of the Treaty on the Functioning of the European Union (TFEU), which, broadly speaking, operates on the basis of complementarity[31].
The EU is attempting to fit yet another of the many pieces into a complex puzzle, and it aims to deliver results still within this decade. Without prejudice to this, a significant – and irreversible – industrial leap will not depend solely on the EU’s efforts. The time has come to implement a coherent, Europe-wide industrial strategy for space, which must encompass not only the EU but also the Member States, as well as the European Space Agency (ESA) and its Member States – particularly those that are not EU members, notably the United Kingdom. Moving beyond “supranational, intergovernmental and national industrial strategies”, with a view to Europe becoming a “true space power”, thus developing and implementing a space industrial strategy – still missing – has been on the agenda for at least two years[32]. The clock is ticking.
[1] Regulation (EU) 2025/2643 of the European Parliament and the Council of 16 December 2025 establishing the European Defence Industry Programme and a framework of measures to ensure the timely availability and supply of defence products (‘EDIP Regulation’) OJEU, L Series, 29.12.2025.
[2] Council Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual financial framework for the years 2021 to 2027, OJEU L I 433/11, 22.12.2020.
[3] According to articles 5(1) and 23(1), “Member States, Union institutions, bodies and agencies, third countries, international organisations, international financial institutions or other third parties may provide additional financial contribution” to the EDIP Program and the USI, respectively.
[4] Proposal for a Regulation of the European Parliament and of the Council establishing the European Defence Industry Programme and a framework of measures to ensure the timely availability and supply of defence products (‘EDIP’) COM(2024) 150 final, 05.03.2024.
[5] For instance, Regulation (EU) 2023/588 of the European Parliament and of the Council of 15 March 2023 establishing the Union Secure Connectivity Programme for the period 2023-2027, OJEU L 79/1, 17.03.2023. The Commission’s proposal, presented just a few days before the Russian invasion of Ukraine, significantly accelerated the legislative procedure, resulting in the adoption of this legal act nearly a year later, in this regard, see, Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council establishing the Union Secure Connectivity Programme for the period 2023-2027, OJEU, C 486, 21.12.2022, p. 179.
[6] A Strategic Compass for Security and Defence – For a European Union that protects its citizens, values and interests and contributes to international peace and security, Council of the European Union, 7371/22, 21.03.2022.
[7] Joint Communication to the European Parliament and the Council, European Union Space Strategy for Security and DefenceJOIN (2023) 9 final, 10.03.2023.
[8] Supra, n.º 4, p. 2.
[9] Regulation (EU) 2021/697 of the European Parliament and of the Council of 29 April 2021 establishing the European Defence Fund and repealing Regulation (EU) 2018/1092, OJEU L 170/49, 12.05.2021.
[10] Regulation (EU) 2023/2418 of the European Parliament and of the Council of 18 October 2023 on establishing an instrument for the reinforcement of the European defence industry through common procurement (EDIRPA), OJEU, L Series, 26.10.2023.
[11] Regulation (EU) 2023/1525 of the European Parliament and of the Council of 20 July 2023 on supporting ammunition production (ASAP), OJEU L 185/7, 24.07.2023.
[12] Supra, note 4, p. 6.
[13] Proposal for a Regulation of the European Parliament and of the Council on establishing the Programme for agile and rapid defence innovation (AGILE) COM(2026) 135 final, 25.03.2026.
[14] Supra, note 13, article 3.º.
[15] Supra, note 13, p. 1.
[16] Ibid.
[17] Supra, note 13, pp. 2 e 3.
[18] Communication from the Commission to the European Parliament and the Council, EU Defence Industry Transformation Roadmap: Unleashing Disruptive Innovation for Defence Readiness COM(2025) 845 final, 19.11.2025.
[19] Supra, note 13, pp. 1 e 2.
[20] Supra, note 18, p. 1.
[21] Supra, note 18, p. 6.
[22] Regulation (EU) 2023/588 of the European Parliament and of the Council of 15 March 2023 establishing the Union Secure Connectivity Programme for the period 2023-2027, OJEU L79/1, 17.03.2023.
[23] Regulation (EU) 2021/696 of the European Parliament and of the Council of 28 April 2021 establishing the Union Space Programme and the European Union Agency for the Space Programme and repealing Regulations (EU) No 912/2010, (EU) No 1285/2013 and (EU) No 377/2014 and Decision No 541/2014/EU, OJEU L 170/49, 12.05.2021. Galileo is a global, autonomous, civilian satellite navigation system under civilian control, comprising a constellation of satellites, a set of ground facilities, and a worldwide network of ground stations, which provides positioning, navigation, and timing services and incorporates security needs and requirements (article 3(1)(a)). Its goal is to provide long-term, state-of-the-art, and secure positioning, navigation, and timing services, ensuring the continuity and robustness of these services (article 4(2)(a)). One of the Galileo services is, precisely, the SPR, restricted to users authorized by governments and intended for sensitive applications requiring a high level of service continuity, including in the fields of security and defence, which uses robust and encrypted signals—it is provided free of charge, among others, to the Member States, the Council, and the Commission (article 45(1)(d)).
[24] “Developing reconnaissance capabilities at an EU level”, 23.01.2024, available at https://defence-industry-space.ec.europa.eu/developing-reconnaissance-capabilities-eu-level-2024-01-23_en (consulted on 22.04.2026). According to the Commission, the EOGS will be made available to Member States starting with the next MFF for 2028–2034 and shall use space-based data to support Europe’s autonomous decision-making in the field of security and defence. In 2024, a pilot project tested a preliminary EGOS service, which is intended to complement Copernicus, the Earth observation system that is also part of the EUSP. The initial EOGS services are scheduled to begin in 2028 and will enable, among others, secure and rapid access to data during crisis situations, higher resolution and revisit frequency from satellites, as well as support for military operations and exercises.
[25] Supra, note 18, p. 6.
[26] Supra, note 18, p. 12.
[27] Supra, note 13, article 1.º. See also “ €115 million Programme for agile and rapid defence innovation (AGILE)”, 26.03.2026, available at https://defence-industry-space.ec.europa.eu/eu115-million-programme-agile-and-rapid-defence-innovation-agile-2026-03-26_en (consulted on 27.04.2026).
[28] Supra, note 13, p. 7.
[29] Supra, note 13, recital 13.
[30] Ibid.
[31] Industry falls under the competence of support, coordination, or complementary actions (articles 6(b) and 173 of the TFEU). Among other aspects, the EU’s scope of action in this field is more limited: it may adopt legally binding acts, but without replacing the competences reserved for Member States or harmonising legislative and regulatory provisions (article 2(5) TFEU).
[32] “European Space Industry declaration following the “Space Council” of May 23rd 2024”, available at https://eurospace.org/european-space-industry-declaration-following-the-space-council-of-may-23rd-2024/ (consulted on 24.04.2026).